Waiting for the Curve to Invert

One of the hallmarks of a Bull market is climbing a ‘Wall of Worry’. Certainly, there is plenty of longer-term optimism with Consumer and Small Business surveys showing extreme confidence. Yet analysts seem increasingly focused on what might go wrong. In the early days of 2009 – 2012 most were certain that the Trillions in money printing by central banks would cause massive inflation and thus contraction level node-bleed interest rates. Recently the worry du jour has been on rising short-term rates that is spiraling our Yield Curve towards inversion. It’s perhaps too widely know that Yield Curve inversion has always given an accurate warning of impending economic recession months later. In ‘waiting for the curve’ too many investors are cautious well before some unforeseeable inversion turning point. This chart clearly shows that historically the ‘current’ Yield Curve is not a concern, in fact, it will remain a positive factor as we approach inversion. Furthermore, even after the ominous flat yield spread is reached where short-term rates are equal to or above long-term yields, we often witness another year or more of positive growth before recessionary contraction pressures break the back of the expansion phase. Based on history, we have at least a couple years of expansion before push comes to shove in halting this 8+ year growth period.

This post was published at FinancialSense on 12/15/2017.